Central Business District (CBD) office rents in Hong Kong are about THB 5,000 per square metre per month, compared to THB 680 per square metre per month in Bangkok.   Tokyo is in second position at THB 3,329 and the Nariman Point district in Mumbai is in third position at THB 2,900 per square metre per month.

Most cities in Asia saw an increase in demand with falling vacancy rates and rising rents.  Beijing office rents rose by over 40%, compared to the first quarter of 2010.  Core Central rents rose by almost 40% in Hong Kong and Singapore by 28.4% year-on-year.

Bangkok office rents remained flat with virtually no change over the last 12 months while Vietnam was one of the few countries where office rents fell.  Ho Chi Minh City saw a 12% decline and Hanoi 8.5%.    Bangkok office rents are some of the cheapest in Asia, with only Manila and Jakarta being lower.

There is almost eight million square metres of completed office space in Bangkok with only 270,000 square metres of new buildings due to be completed by the end of 2014.

“We are starting to see some increase in demand driven by the overall strength of the Thai economy,” stated Mr. James Pitchon, Executive Director of CBRE Thailand.   Annual new demand for Bangkok office space fell from 2006 to 2009 and improved slightly in 2010, but it is still well below the levels seen between 2000 – 2005.

“If we see a return to the level of demand that we saw between 2000 – 2005, then we could see rents rise significantly as vacancy rates fall, particularly for the best grade A buildings,” said Mr. Nithipat Tongpun, Executive Director of Office Services at CBRE Thailand.

Click to download a full report of Q1 2011 Asia Pacific Office MarketView  

The Airports of Thailand Public Company Limited (AOT) has announced the air transport statistics for August 2010.

Total international passenger disembarkations at Bangkok’s Suvarnabhumi and Don Muang airports were 1,259,584 in August 2010 compared to 1,177,333 in August 2009, an increase of 7% Y-o-Y and an increase of 1% on August 2008 disembarkations. Domestic passenger disembarkations at Suvarnabhumi and Don Muang airports were  544,595 in August 2010 compared to  587,006 in August 2009, a 7% decline on August 2009 disembarkations but an increase of 7% on 2008 disembarkations.

International disembarkations at Phuket’s airport were 121,666 in August 2010 compared to 86,829 in August 2009, a 40% increase. This represents a 50% increase on August 2008 figures. Domestic passenger disembarkations were 144,739 compared to 142,798 in August 2009, an increase of 1% on August 2009 and an increase of 17% on August 2008 figures.

The Airports of Thailand Public Company Limited (AOT) has announced the air transport statistics for July 2010.

Total international passenger disembarkations at Bangkok’s Suvarnabhumi airport were  1,328,131 in July 2010 compared to 1,171,857 in July 2009, an increase of 13% but this represents a 1% decline on July 2008 disembarkations. Domestic passenger disembarkations at Suvarnabhumi and Don Muang airports were 499,124 in July 2010 compared to 519,979 in July 2009, a 4% decline on July 2009 disembarkations but an increase of 2% on 2008 disembarkations.

International disembarkations at Phuket’s airport were 114,007 in July 2010 compared to 80,528 in July 2009, a 42% increase. This represents a 27% increase on July 2008 figures. Domestic passenger disembarkations were 144,999 compared to 140,962 in July 2009, an increase of 3% on July 2009 and an increase of 7% on July 2008 figures.

“This shows that tourist arrivals are recovering faster than many people expected”, according to Natapat Watanakulchai who specializes in research on hotel market in Thailand for CB Richard Ellis.

We are already half way through 2010 and already it has proved to be a memorable year, albeit for negatives reasons with the April-May anti-government protests in Bangkok. With the protests effectively closing down key areas of the Thai capital, how did the political crisis affect the various sectors of the Kingdom’s property market?

James Pitchon, executive director at CB Richard Ellis Thailand, said that despite the turbulent scenes played out in Bangkok, said there has been “no significant change” in the property sector with the exception of hotels.

Offices

“Bangkok’s overall office vacancy rate is currently at 14.4%, with the Grade A Central Business District vacancy slightly higher at 17% and neither figure has been much affected by the political events,” said Mr. Pitchon.

“Only four office buildings are under construction in the whole of Bangkok with a total area of 118,000 square metres. The total office stock is about eight million square metres so the amount of new supply will not have a significant effect on the market,” he added.

The largest new development will be the 72,500 square metre Sathorn Square on the corner of Narathiwat and Sathorn Roads. This development is scheduled to be completed by the end of this year and will have direct access via a covered bridge to the Chongnongsee BTS station and will have a W hotel on a separate building on the same site.

“Unlike other Thai property sectors we have no concerns about significant oversupply, the problem is that demand has been weakening since 2007, we have seen a small amount of net growth in occupied space this year but not much,“ said Mr Pitchon.

More than 50% of demand for offices in Bangkok comes from Multi National Companies, who have been cautious about increasing expenses following the global financial crisis and fears about a double dip recession. Thailand’s business reputation has also suffered from multiple blows since 2006 which makes it even harder for companies to get approval to expand in Thailand.

The macro economic numbers have been very positive and CB Richard Ellis expect that this will eventually feed through to increased demand , falling vacancy rates and rising rents. “Tenants with leases expiring over the next 12 months have to decide whether to renew in their existing premises or relocate to better quality, better located buildings close to mass transit stations,” said Mr. Pitchon.

“If the cost of interior decoration in the existing premises has been written off and is no longer fit for purpose then the next 12 months represents an opportunity for tenants to secure new premises at rental rates that are unlikely to fall further and if there is continued economic growth will start to rise,” he said. Grade A rents have only fallen by about 10 % over the last three years and are still the second cheapest on Asia with only Jakarta having lower rents.

Condominium Market

Most of the cranes that one sees on the skyline are condominium developments and following a lull in launches in March and April developers are launching new projects. However, the market has changed, most new developments are one bedroom small units. Thai rather than foreign buyers dominate the market. Mr. Pitchon said there are three types of buyer.

End user owner occupiers : Thais have adapted to condominium living and a survey of projects completed 3 years ago shows owner occupancy rates of 70- 80 %. There are fears about the affordability of new projects for owner occupiers as rising land prices have increased prices.

Buy to Rent Investors : low deposit savings rates are driving local investors to property. Even after the .25% interest rate increase in July, it is tough to find savings rates for three month deposits of better than 0.75 %. Buy to rent investors are hoping for yields of 6 % or more but will still be content with any return better than current savings rates which are currently negative once inflation has been taken into account. There are limited investment choices in Thailand, the stock market is seen a being volatile, the fixed income market is very small and so money is being driven to the property market.

Speculators : Buyers who purchase off plan with low down payments who hope to resell prior to completion. This the area of the market where this the most concern, if speculators stop buying then the volume of sales will fall which may not be a bad thing, but if they buy then default on the final payment then that is where there will be problems. Despite the turmoil in April and May developers are still able to sell some projects out on the launch day – interest rates are going to have to rise substantially before people decide that the keeping money in the bank on deposit is better idea than investing in property.

Mr. Pitchon said the Thai government may decide that non interest rate measures such as higher deposits may be necessary if they feel the condominium market is overheating. Non interest rate measures have been announced in China, Hong Kong and Singapore. “In the larger unit luxury sector there is some unsold inventory in completed buildings and developers are taking steps to clear this stock with incentives such as “guaranteed yields” and furniture packages inclusive in the price.

“We estimate that unsold inventory only accounts for less than 3 % of the total downtown stock and will not trigger a fall in prices.”

On the contrary, Mr. Pitchon said, prices have continued to rise in some of the better developments that have been completed over the last three years.

Hotel

The Bangkok hotels and hospitality industry was arguably most affected by the political unrest earlier this year. Travel warnings, international news headlines, violence and deaths all combined to turn tens of thousands of tourists away and hotels located near the protest site were forced to close their doors.

Thailand is blessed with a large number of repeat visitors and Mr Pitchon estimates around 40-50% of the Kingdom’s visitors are return tourists.

“Fundamentally, Thailand remains attractive as a destination,” Mr Pitchon said, “while many areas were totally unaffected by Bangkok’s issues. Phuket, for example, enjoys a degree of separation from branding it as ‘Phuket’, rather than ‘Phuket, Thailand’.” Mr. Pitchon pointed out that international passenger arrivals to Bangkok Airports increased by 2% in June and International arrivals to Phuket increased by 47%.

The Airports of Thailand Public Company Limited (AOT) announced the air transport statistics for June 2010 and from that it said total international passenger disembarkations at Bangkok’s Suvarnabhumi airport were 1,013,782 in June 2010 compared to 994,205 in June 2009, an increase of 2% but this represents a 19% decline on June 2008 disembarkations. Domestic passenger disembarkations at Suvarnabhumi and Don Muang airports were 394,278 in June 2010 compared to 431,514 in June 2009, a 9% decline on both June 2009 and 2008 disembarkations.

International disembarkations at Phuket’s airport were 94,681 in June 2010 compared to 64,451 in June 2009, a 47% increase. This represents a 23% increase on June 2008 figures. Domestic passenger disembarkations were 102,505 compared to 108,270 in June 2009, a decline of 5% on June 2009 and a 9% decline on June 2008 figures.

Aside from domestic political issues, Mr Pitchon pointed to a potential difficulty for the country’s hotel industry with new developments set to increase the industry’s overall number of rooms by 30% over the next two years. “While there is likely to be a recovery in terms of arrival numbers, it remains to be seen whether visitors numbers can grow in line with the new inventories being developed,” he said.

The Airports of Thailand Public Company Limited (AOT) has announced the air transport statistics for June 2010.

Total international passenger disembarkations at Bangkok’s Suvarnabhumi airport were 1,013,782 in June 2010 compared to 994,205 in June 2009, an increase of 2% but this represents a 19% decline on June 2008 disembarkations. Domestic passenger disembarkations at Suvarnabhumi and Don Muang airports were 394,278 in June 2010 compared to 431,514 in June 2009, a 9% decline on both June 2009 and 2008 disembarkations.

International disembarkations at Phuket’s airport were 94,681 in June 2010 compared to 64,451 in June 2009, a 47% increase. This represents a 23% increase on June 2008 figures. Domestic passenger disembarkations were 102,505 compared to 108,270 in June 2009, a decline of 5% on June 2009 and a 9% decline on June 2008 figures.

The first target markets are Vietnam and Cambodia because of their proximity, level of development and the local competition is not as well developed as the more mature markets such as Malaysia.

There are a wide range of opportunities in the Vietnamese and Cambodian markets from city centre office, retail, residential and hotel developments through to the growing resort markets in these countries as well as industrial estate opportunities.

Entering new markets is always a challenge.  Rules and regulations governing property development and ownership are different.  The dynamics of each of the property sectors in these countries is also different to Thailand.

Accurate information on regulations, supply, demand, pricing, competitors and prospects for each property sector is essential for a Thai developer to succeed in a new market.

CBRE is well placed to advise Thai clients on how to enter these markets.

CBRE established offices in Vietnam in 2003 and now has over 200 real estate professionals operating out of offices in Ho Chi Minh City, Hanoi and Danang.

The research, consulting and marketing teams have already worked with a large number of overseas developers who have successfully built projects in both the main cities and resort areas.

CBRE established and office in Phnom Penh in 2009 and have been advising clients on the Cambodian market for many years before the office opened.  Mr. David Simister, Chairman of CBRE Thailand, Cambodia and Vietnam advised the Australian Government on the acquisition of a new site for their Phnom Penh Embassy in 2005.

“There is very little publicly available information on the Vietnamese or Cambodian markets.  CBRE sells and leases properties in these countries everyday which is why we have the best market data on actual transactions and future supply.  This enables us to provide our clients with the best market data giving them the best knowledge to enable them to succeed,” said Mr. James Pitchon, head of research and consulting for CBRE Thailand.

There are opportunities for Thai developers to acquire or build properties in both Cambodia and Vietnam but accurate market research will be critical in order to succeed.

1. The whole of Thailand (All airports managed by AOT)
2. Bangkok international airports Suvarnabhumi and Dong Muang
3. Phuket International airport

We have analysed the impact of

1. The December 2004 Tsunami
2. The 2008 Lehman Bankruptcy
3. The November 2008 Bangkok airports closures
4. The 2009 Bangkok April Riots
5. The 2010 Bangkok Turmoil

Some of these events were spread close together and others more spread out.

All events apart from the Lehman bankruptcy were local.

International arrivals in Bangkok appeared to take only 6 months to recover from the multiple events of the global financial crisis, the Bangkok airport closures and April 2009 Bangkok riots.

The impact of the 2004 Tsunami was far more severe partly because of the physical caused to many hotel properties and the overall death toll of tourists. Even so the recovery took only 14 months.

The graphs below show the impact of these events on overall numbers and Phuket.

The full consequences of the May political unrest have yet to be felt, but the demand for residences, offices and industrial properties in Bangkok just refuses to go away

It is still too early to assess the impact of the two months of civil disturbance on all types of property because the market moves far more slowly than the stock market, said James Pitchon, executive director of CB Richard Ellis (CBRE).

Changes are slow even in the rental market because office tenants usually have three-year lease commitments and residential tenants are tied to year-long agreements, while retail tenants tend to hold three- to 25-year leases.

“Frankly it is too early to say what the impact will be on prices, rentals and the level of transaction activity,” he said.

However, it seems that no matter how bad the situation may look, the market does continue to move. Although the company had to move to a temporary office at the Bitec centre on the Bang Na-Trat Highway to continue functioning, CBRE concluded some transactions even in mid-May when the numbers of deaths and injuries were mounting in Bangkok. The transactions were in Bangkok and Hua Hin, and were a mixture of new sales and resales.

“So life goes on, and people are still going to need somewhere to live. They are going to need offices, they are going to need factories and they are going to continue to shop,” said Mr Pitchon.

He said that as far as the residential market is concerned, his earlier concern had been that it seemed to be approaching a level of overheating because a number of projects were sold out in the first quarter.

“Our concern now is over the [lower] demand volume, but we still believe that some of the momentum factors remain the same. For example, the desire to live next to a mass transit station.”

Although some people think projects farther into a soi will gain favour with buyers who see them as safer in light of the arson of buildings on major roads after the red shirt protest was suppressed, Mr Pitchon does not believe the market will turn this way.

“In that case, how are they going to get to work? How many buildings were burned? Come on, it has been exaggerated.

“It’s a bit like saying Londoners would never use mass transit again after the [2007 terrorist] bombings – that didn’t happen.

“I’m convinced people still want to live close to the mass transit system because of the convenience.”

It is expected that the level of speculative buying will decrease but will not die out completely. People will still be looking at property as an income-producing investment as long as interest rates on bank deposits remain low.

Turning to the office market, Mr Pitchon said that the demand has been low since 2006, both because of the domestic political situation and the global financial crisis.

“We were starting to see an economic recovery in the first quarter of 2010, but that has not yet resulted in increased demand. However, there are still people leasing new office premises.”

An emerging bright spot for this market may be when companies start reviewing their business contingency plans in the aftermath of the violence in Bangkok.

“We may see companies that have multiple locations in Bangkok choosing to locate at least one office at a greater distance from the others,” he said. “So who knows what will happen? We may see people putting a greater distance between their facilities. This could benefit locations along the BTS skytrain extension to Soi La Salle, which is expected to be operating in 2011.”

The mass transit system is the key to setting up an office a little further away from the central business district, because from the user’s point of view the physical distance covered by the train is not important. This means business facilities don’t have to be crowded into one area.

The broad picture shows that there is very little new supply coming into the office market. Only one “grade A” office, Sathon Square, will be completed this year and another, Park Venture, next year.

“There are two grade A office buildings under construction, so we will have to wait and see what will happen to demand, but we do not expect to see a significant number of companies closing.”

In the industrial land market, Mr Pitchon said the overall numbers were looking better in the first quarter following a recovery in global demand for manufactured products, but again, this has been influenced by the unrest.

“Manufacturing areas and ports were not affected by the protests, but obviously Thailand’s image has been badly damaged as a destination for investment in manufacturing.”

The hotel market suffered the most immediate impact of the unrest in Bangkok. “Hotels have to sell their rooms every night and obviously we saw the closure of a number of hotels, along with multiple travel advisories from foreign governments.”

Both Bangkok and Phuket saw arrivals improve in the first quarter of the year, with the April figures for Bangkok being similar to 2009, and the figures for Phuket better than in 2009 and 2008.

“I believe that there are many repeat visitors to Thailand who despite the turmoil and bloodshed in May have a loyalty to Thailand as a destination,” said Mr Pitchon.

“The May figures are obviously going to be very poor, but we are also now entering the low season. The big test will be how Thailand performs in the peak season at the end of the year.”

Mr Pitchon added that one of the biggest challenges in the hotel industry continues to be the amount of new room inventory, which was a problem even before the events in April and May. Should the number of tourist and business arrivals drop, this will be a tougher issue to resolve.

However, he added, even in the period immediately after the unrest there were some significant capital transactions. A major example was AIA being selected by the Stock Exchange of Thailand to buy its 9.6-rai site on Ratchadaphisek Road for 1.6 billion baht.

Two other examples were the Seacon Group’s acquisition of the 500,000 square metre Future Park Bang Khae shopping centre for 2.5 billion baht, and the sale of the Ban Taling Ngam Hotel on Koh Samui for 750 million baht.

The Airports of Thailand Public Company Limited has announced the air transport statistics for May 2010.

“The results are not as bad as many expected with Bangkok’s international disembarkations only down 8% on May 2009 while Phuket’s international disembarkations increased by 62% on May 2009”, according to James Pitchon, executive director of CB Richard Ellis.

Although the year-on-year comparison looks impressive, it must be remembered that May 2009 was weak because of the April 2009 riots in Bangkok. May 2010 is still impressive given the circumstances with many governments warning against coming to Thailand except for essential reasons.

Total international passenger disembarkations at Bangkok’s Suvarnabhumi airport were 906,366 in May 2010 compared to 986,120 in May 2009, a 8% decline. This represents a 29% decline on May 2008 disembarkations. Domestic passenger disembarkations at Suvarnabhumi and Don Muang airports were 435,227 in May 2010 compared to 480,909 in May 2009, a 10% decline. This represents a 16% decline on May 2008 disembarkations.

International disembarkations at Phuket’s airport were 95,633 in May 2010 compared to 59,051 in May 2009, a 62% increase. This represents a 25% increase on May 2008 figures. Domestic passenger disembarkations were 107,661 compared to 113,723 in May 2009, a decline of 6% on May 2009 and a 15% decline on May 2008 figures.

The numbers show the resilience of the Thai tourism industry but aside from fears about political stability there are still many challenges including the weak Euro which makes Thailand a more expensive destination for many of Thailand’s key feeder markets. Bangkok and to a lesser extent many of the resort markets face a significant increase in hotel room inventory so even if tourist arrivals recover, hotel owners will face downward pressure on rates because of newer competition. The real test of what the effect of the unrest will take place in the peak season at the end of this year.

Visit us to find a condo or villa in Phuket to stay for your holidays.

BRT Route 1: Chong Nonsi BTS Station to Ratchada-Ratchapreuk Intersection

Source: Bangkok Metropolitan Administration, CBRE Research

Transfer fees will remain reduced from 2% to 0.01% and mortgage registration fees from 1% to 0.01%.

This will reduce costs for the sale of completed property but will have no effect on off plan launches.

According to statistics collected by CB Richard Ellis from Airports of Thailand Public Company Limited (AOT), the total number of disembarking international passengers at all AOT managed airports in April 2010 was 1,318,606 compared to 1,286,119 in April 2009 a 2.5% increase.

International arrivals to Suvarnabhumi Airport decreased by 0.6% to 1,184,241 from 1,190,820 in April 2009 and represented a 14.9% decrease from April 2008 figures.

However, international arrivals to Phuket Airport continued to improve despite increasing political tensions in Bangkok. The total number of international passenger arrivals at Phuket Airport was 120,015 compared to 84,871 in April 2009 a 41.1% increase. When compared to 2008 figures, Phuket international passenger arrivals increased by 40.0%. The total number of domestic passenger arrivals at Phuket Airport in April 2010 was 146,088 compared to 145,209 in April 2009 a 0.6% increase.

According to James Pitchon, executive director at CB Richard Ellis, “the April figures were very encouraging taking into account Bangkok’s escalating political protests and the closure of many European airports due to volcanic ash. Obviously, May figures are likely to be poor. The question is will they recover and how long will it take.”

There are multiple challenges not just the damage to Thailand’s image due to the civil unrest in Bangkok. The economic weakness in Europe and the depreciation of the Euro against the Thai baht will have some effect on many of Thailand’s main feeder markets.

“Having spent most of April in Europe, my length of stay caused by airport closures, I am still convinced about the strength of Thailand’s brand as a holiday destination. Many people I met had visited Thailand and wanted to come again or were repeat visitors to Thailand. I believe that the European markets may hold up better than the many of Thailand’s Asian feeder markets. The Thai brand had suffered from multiple setbacks from the 2006 coup to the tragic events in May this year. I think the brand is battered and bruised, it is down but not out.”